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Resumption of Coal Trade Between Australia and China

The resumption of the coal trade between Australia and China is being watched as a test case for the return of shipments of other Australian goods, such as wine and barley, which accounted for billions of dollars of trade between the two nations.

Coal facilities
Coal facilities

Limited Chinese Interest in Australian Coal

Chinese interest in Australian coal has been limited by the upcoming Lunar New Year holiday and high domestic inventories, meaning few deals have been completed since China lifted an unofficial import ban last week. One utility, China Energy Investment Corp, placed an order to buy Australian thermal coal in late January. However, ample stocks and weak demand in China have doused the appetite for fresh shipments, with the other utilities still waiting to book cargoes.

High Coal Stocks and Lunar New Year Holiday Dampen Trade

With the Lunar New Year holiday, which starts on January 21st, and high domestic inventories, coal storage at power plants was 30.5 million tonnes, around 9% lower YoY, too high "to generate much buying interest in Australian coal," a manager from a state-backed utility said. Additionally, Analysts from China-based coal consultancy said in a note on Monday that industrial power consumption is facing a double whammy of swelling COVID infections and the holiday season, causing a slow de-stocking at the utilities.